Damschroder: Cities no longer trust state government

Since the state spent millions of public dollars to attract the Rock & Roll Hall of Fame (R&R HOF) to Cleveland, it’s only fitting to quote lyrics from an old Billy Joel hit to remind all Ohioans, “You can’t go the distance with too much resistance.”

The 1999 R&R HOF inductee tells us in song that “some love is just a lie of the mind, it’s make believe until it’s only a matter of time. Some might have learned to adjust but it never was a matter of trust.”

There's a partnership currently going sour between state and local government in Ohio, with slightly more than 11 million citizens playing the role of children in a dysfunctional union. These innocent victims will have diminished futures because of irreconcilable differences.

The wedge issue splitting state and local government is the Kasich administration budget proposal to collect municipal business profit taxes at the Ohio Department of Taxation and send each of the 609 tax jurisdictions their pro-rated share of the take on a quarterly basis.

The idea has major supporters including the Ohio Chamber of Commerce, the Ohio Society of CPA’s and the conservative Buckeye Institute, which all say the governor has proposed a common sense solution to a complex issue that discourages businesses from investing here.

But, no local government has shown support for the idea. Ohio Municipal League Executive Director Kent Scarrett told me that “this is a new tax collected under state authority. It confiscates the local tax authority and the revenue could be redirected to any state purpose the General Assembly might desire with a simple change to the law. The state will not be able to resist $600 million a year.”

The bottom line is simple: Local governments no longer trust the state to act in partnership with them. Huge cuts to the local government fund, slashed from 3.68 percent to 1.66 percent of the state budget, have Ohio’s smallest villages and largest cities united in distrust of the state government. But much worse, Scarrett says, “there is a level of hostility from the state toward local government that is new in Ohio.” Scarrett claims a simple fix to the Ohio Business Gateway could solve the multiple jurisdiction tax filing issue the governor claims as the cause for a shift to collection in Columbus. Rather than take that option the governor is going after the tax itself and Scarrett notes that it is a direct assault on Ohio Republican ideology.

When a minority of Republicans supplied the votes required for the creation of a state income tax in 1971, they claimed it was for small towns that lacked the tax base of cities that were rich with local income taxes. The majority of Republicans who voted against creation of a state income tax said they were protecting citizens from the centralized power of big government in Columbus. All Ohio Republicans were united behind the idea that the best government was small and close to the people being served. Their disagreement was over how to best serve local government.

Now under Republican rule, power is being centralized and the state budget is growing faster than the economy or the population. Local government is being starved to feed the beast in Columbus as the dire prophecy of past GOP generations is being fulfilled by current state officeholders who’ve moved away from bedrock philosophy without selling the shift to their constituents.

As a result, people who need to work together as a cohesive team to attract economic development are in the midst of a bitter battle. “Local officials are afraid to cross the governor,” said Scarrett, who tells me they’re working with state legislators to keep the current tax system.

Meanwhile, state economic development officials blame local tax complexity for slow growth, as locals complain that the state is hoarding dollars in the rainy day fund while their municipality is in distress. This is not the ideal environment to attract prosperity to Ohio. Every big development decision requires a win at both the state and local level. You really can’t go the distance with too much resistance and that’s why there has been persistence in the existence of decline in the once great state of Ohio.

John Damschroder, a Fremont resident who worked in Gov. George Voinovich’s administration, writes about business and economic development in Sandusky County.